The Arts Council has pledged to “lead the arts” to a “strong and resilient future” in the four-year programme of cuts announced by the government last week.

The flagship body for UK culture said it will implement funding reductions of 6.9% for the swathe of groups it supports across the country, but promised to continue to back the “unparalleled” sector.

It has been told to halve its operating costs to £12 million as part of a 29.6% budget drop announced in the controversial Government Spending Review.

“These are severe cuts, made worse by the fact that around 80% of them have to come in the first two years of the settlement,” reflected Liz Forgan, the Chair of Arts Council England.

“We are determined to lead the arts through this tough period, using all our knowledge, expertise, and brokering skills and drawing on the resourcefulness and imagination around us.

“For several months we have been in conversation with the Department for Culture, Media and Sport, our funding partners, arts organisations and artists about how we can best support the arts in dealing with significant cuts. We have had to prioritise, to achieve a 6.9% cut to our portfolio within a 14% cash cut to our overall 2010/11 budget.

“These measures are designed to ensure a strong and resilient future. The country needs its artists at a time like this and we are about building, as well as sustaining, our unparalleled arts and cultural sector.”

The Council’s provision for “strategic opportunities for artistic work”, which currently supports touring work, the Cultural Leadership Programme and the Manchester International Festival, will be slashed by 64% to £21 million.

The financial period between April 2011 and April 2012 will be treated as a “transitional year”, passing the 6.9% cut to most organisations funded by the Council in a bid to give them “a degree of stability” and a quick decision.

The level has been subsidised by 50% cuts to the youth-focused Creativity, Culture and Education scheme and partnership organiser Arts and Business, which will be replaced by a “challenge fund” aimed at helping arts groups raise funds and tempt donors.

Arts and Business will receive no core funding after April 2012. The group’s chief executive, Colin Tweedy, called the decision “surprising”, but said the organisation would offer “expertise, excellence and intelligence to the cultural communities.”

“The messages of support sent by so many of our members in the last few hours already underlines this and reinforces our commitment,” he added.

All organisations will have to re-apply for funding in April 2012, with the Council conceding some decisions would be made “against clear strategic aims”. It also admitted that the reduction in the administrative budget, which amounts to just 3.4% of the Council’s current grant-in-aid, had left leaders with “serious concerns about the ability of the organisation to operate effectively”.

Full details are expected to be announced when the Council publishes its 10-year strategic framework for the arts on November 4 2010, and individual funding decisions for the 2012-2015 financial years will be announced by the end of March 2011.